January 22, 2022 6:34 pm

Markets with numbers in red, reaction to disagreements with the IMF

The prospect of an agreement with the IMF remains the main driver of the local market, but the latest statements by Martín Guzmán do not help to generate very good expectations. As with the restructuring of private dollar debt, the economy minister proposed unreasonable targets (or at least not close to the position sought by the international entity), how a primary equilibrium only in 2027; remember that, specifically, the IMF intended this for 2024. This could be reflected in the price of global bonds, which had generalized reds as their first reaction. Here, the biggest problem is time: in March the entity should be paid about US $ 2.879 million, and the current position increases the chances of a delay in compliance.

The outlook for debt in pesos is not hopeful either. The Central Bank’s record monetary issue to assist the Treasury (4.6% of GDP last year) puts pressure on the value of pesos and it makes the path of renewing the current debt stock and meeting the financial needs of the year even more challenging.

If we talk about maturities, the team of Rafael Brigo, Secretary of Finance, will have a major litmus test in March. There it will have to face maturities of more than $ 1,310 billion; mainly, debt adjusted for inflation. While April and May concentrate maturities of $ 570 billion and $ 711 billion, respectively. With no less detail: 78% of this debt is in private hands.

The fund industry continues to demonstrate its strength and ends another year on the positive side. Specifically, with nearly $ 3.5 trillion in assets under management, this vehicle showed a growth of 88% in the year (at an average of 5% per month). Measured in dollars, they exceeded US $ 16,000 million, after an advance of 28% in the year.

If we analyze the performance, and leaving aside equity funds (which accumulated an average rise of 60%), CER funds led returns of the peso segment – they advanced an average 52%, in line with inflation. It was followed by fixed income funds in pesos with redemption in 24 hours, with a direct return of 39% / 44%. Further away, the money markets add a profit of 35% and finally, dollar linked funds accumulated a rise of 26%, above the evolution of the official exchange rate, which advanced by 22%.

With the minutes of the FED -of the last FOMC meeting, in December-, Concern about persistent inflation was reaffirmed. In this sense, the futures of the FED funds (Future Fed Funds) recalculated the probabilities of a future rise in the reference interest rate, until granting it today 80% chance at one jump (of 0.25pp) at the next meeting in March.

Another sign of a more ‘Hawkish’ entity was in comments on the balance sheet. The committee members mentioned the possibility of starting to reduce it (today, it stands at about US $ 8 billion), after raising the rate. The key will be in the ‘repos’ for the management of market liquidity, as the entity decompresses its balance sheet. Recall that the last time this happened there was a momentary liquidity crisis (2019), and the rate of overnight loans came close to 10% (of the 2% average).

The context for the stock market is not the most encouraging, but even so, analysts are optimistic about the performance of American stocks. According to Factset, in the analysis of more than 10,500 recommendations, 57% are buy, three percentage points above last year. Analyzed by sectors, energy, communications, information technology and health are the most optimistic.

In the analysis of the Wall Street indices, and taking the S & P500 as a reference, the projections are mixed. The most conservative forecast that the SPX will close 2022 just above 4,900 points. The most optimistic point to an index above 5,300 points, while the pessimists believe that it will fall to 4,400 points, mainly affected by the rate hike. For reference, the index is around 4,700 points.


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